There are many like me who may be a bit confused about tariffs.
In theory, tariffs, taxes on imported goods, seem like something I would support. After all, if nothing else, I am pro-America. And anything that gives Americans a leg up, I support. Now, if we can send aid to others, I support that, too. But just as other countries should put their needs before ours, as Americans, we must protect American interests first.
I am the first to acknowledge that economics is not my strongest subject and there are many much more knowledgeable than myself who say that the recent tariffs are harmful to America. The problem is when we hear someone really smart explain why tariffs are good, it makes sense, and we believe them. But then someone else really smart explains why they are bad — and again they make a good argument — we believe them. Many times we find ourselves just agreeing with whomever spoke last or loudest.
Another issue regarding tariffs is the political divisiveness with everything involving President Trump. There may be economists who were pro tariffs until Trump won the presidency, and now are against them just because they hate Trump and vice versa. Diving into the subject, I decided to start at the source but also read a famous modern conservative economist’s thoughts on tariffs before the Trump administration to help me come to a better understanding.
While 1776 is mostly known as the year America declared its independence, economically it is better known as the year Scotsman Adam Smith wrote his magnum opus “The Wealth of Nations.” Known as the father of capitalism, Smith revolutionized how nations saw the world economy and believed it could be studied and understood using natural laws. As America’s adoration for capitalism is a second only to its love of democracy, it seems worth knowing Smith’s stance on tariffs. It’s easy: he was against them.
My goal is to soon read “The Wealth of Nations.” But knowing reading 18th century economic theory will be a challenge, I instead began with Mark Skousen’s 2006 book “The Big Three in Economics: Adam Smith, Karl Marx, and John Maynard Keynes,” to get a good foundation of economic thought over time. Skousen sees these three as the most important economic thinkers but does not see them as equal. He clearly believes Smith is at the top while Marx at the very bottom.
At its heart, Skousen believes Smith’s theory on capitalism is about free trade and competition, and tariffs, therefore, restrict free trade and “hinder the natural flow of goods and services, raising prices and causing inefficiencies.” Smith believed in the “invisible hand” or that market forces control the economy and “when nations specialize in what they do best and trade freely, they maximize wealth. Tariffs disrupt this process by artificially raising prices and encouraging inefficiency.” Smith believed that tariffs were a tax on the people that only benefited producers at the expense of everyone else. Free trade on the other hand “would lead to greater cooperation and peaceful relations between nations, fostering economic growth and mutual benefit.”
We do not know what Smith would say about Trump’s policies. Smith wrote his opus long ago, and the world has drastically changed since then.
With that in mind, I also read from a more recent economist who wrote before Trump came into office because most of the famous conservative voices online today are praising Trump’s America First policy. While I agree with the America First concept, this question remains: are we making sound economic policies?
Growing up in northern Virginia near George Mason University, one of the first economic professors to come to mind is Dr. Walter Williams, a conservative who put the university on the map and gained notoriety for guest hosting for Rush Limbaugh.
There is no questioning Williams’ conservative beliefs, so I wanted to find something he wrote about tariffs before Trump’s first term. I was fortunate to find an article he wrote for Investor’s Business Daily in early 2016 titled, “The Unseen Cost of Saving Jobs with Tariffs.”
Williams based his article around the idea of French economist Claude-Frédéric Bastiat’s “That which is seen and that which is not seen.” Williams said when making tariff policy, we must focus not only on what we see, but also what we don’t. His example was the 2002 tariff on steel that was raised to 30%. The “seen” was impressive. American steel prices rose, helping the steel industry and saving 1,700 steelworker jobs. But what about the “unseen?”
According to Williams, those 1,700 jobs cost American consumers $800,000 per job from the higher prices and damaged companies like car manufacturers who had to cut 16,000 jobs in Texas alone with thousands more in other states. Williams stated, “In other words, industries that use steel were forced to pay higher prices, causing them to have to raise prices on what they produced. As a result, they became less competitive in both domestic and international markets and thus had to lay off workers.”
Williams stressed that tariff beneficiaries are always seen while the victims are not, which is why politicians love them. I am not saying Trump’s tariff policies are wrong; I really don’t know. In our current world environment perhaps Smith and Williams would agree with Trump. Neither are around to comment. Williams died in 2020, and Smith, a little earlier in 1790.
If Trump is only using tariffs as tools for negotiations and America comes out smelling like roses then maybe economic textbooks will add new chapters. Only time can tell. And in the end, history will be the ultimate judge.
James Finck is a professor of American history at the University of Science and Arts of Oklahoma. He can be reached at HistoricallySpeaking1776@gmail.com.
